Manhattan market shows signs of cooling despite sky-high sales in Q2

Inman News

The residential market continued going strong but showed signs of reaching a tipping point, according to data released by New York City brokerages.

New York’s manic real estate market is finally showing signs of cooling after a whirlwind year, according to market data.

The residential market continued going strong but showed signs of reaching a tipping point or possibly even shifting back toward a buyer’s market, as mortgage rates shot up and the stock market dropped affecting buyers’ finances, according to data released by New York City brokerages.

All signs during the second quarter pointed toward a slowdown wrote Frederick Warburg Peters, president of the New York City brokerage Coldwell Banker Warburg, in his brokerage’s Quarter 2 report.

“Throughout the second quarter, that slowdown has accelerated: fewer signed contracts, fewer bidding wars, more price reductions, and a gradual increase in available inventory,” Peters wrote. “The gradually slowing sales market manifests in all boroughs and at all price points throughout the city.”

Other brokerages concluded that Manhattan is undeniably headed toward a shift back to a buyer’s market, though the shift is not immediately obvious through  second-quarter data. The average contract signing date was Jan. 30 when mortgage rates sat at 3.55 percent and the S&P Index was at 4,516, the report notes.

Currently rates are approaching 6 percent and the S&P has fallen to just above $3,800 — drastically different market conditions.

Brown Harris Stevens found prices rising five percent year-over-year for resale apartments in Manhattan during the second quarter, with resale apartments spending 28 percent less time on the market than a year ago.

Apartment prices averaged at over $2.1 million during the second quarter — 9 percent higher than a year ago — while the median price was at $1,225,450 according to BHS data, a 7 percent year-over-year increase.

Despite sales and prices both going up, yearly percentage increases are decreasing every quarter, according to a report from SERHANT.

“While sales and prices were up, the yearly percentage increases have been declining each quarter, leading to the notion that we are at an inflection point in the market,” Garrett Derderian, director of market intelligence at SERHANT., said in a statement. “Sales are always a lagging indicator of market performance, and the numbers may not line up with reality today. The quarter started strong on all fronts, including newly signed contracts.

“However, by mid-May, the market began to shift. Rising interest rates impacted the number of sales at lower price points, and stock market volatility caused sales at all levels to slow. Still, the number of contracts signed is higher than every quarter since 2016 except last year, which was a phenomenal year.”

Meanwhile, a report from Douglas Elliman found that contract signings in Manhattan have been falling annually since April 2022 when compared to the previous year’s extremely low mortgage rates. It also found contract signings were falling month-over-month for three straight months as higher rates have brought about weaker demand and slightly increased inventory.

Compass additionally found that sales volume jumped 18.6 percent year-over-year to $15.6 billion, the highest level in a decade, while contract signings dropped nearly 25 percent compared to 2021.

The second quarter saw a 16.3 percent year-over-year increase in inventory, which coupled with falling contract signings likely means that double-digit year-over-year price increases and constant bidding wars will likely end, according to data from Compass.

“The data included in the signed contracts section, which is more timely, reflects a softening in the market,” Stacey Froelich, an agent with Compass, said in a statement. “The market started to transition at the end of Q2. Buyers are currently feeling uncertain about rising mortgage rates, where pricing will shake out, inflation, the volatile stock market, and ultimately recession.  Even though inventory levels are still fairly low we are seeing buyers take a pause.”